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Shareholder says company under suspicion for selling fake goods in China

By Legal News Line | Feb 9, 2015

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LOS ANGELES (Legal Newsline) - A class action lawsuit filed on behalf of shareholders of a Chinese online company says the company was being investigated by the Chinese State Administration of Industry and Commerce (SAIC) over allegations of selling counterfeit goods.

Ming Huang filed the lawsuit on Feb. 4 against Alibaba Group and its management staff, alleging the company made false statements regarding its business operations.

The SAIC, the main corporate regulator in China, met with company executives in July 2014 for about two months before Alibaba's initial public offering, the lawsuit said.

The regulators were looking into “highly suspicious, even illegal, business practices” at the company, the lawsuit alleged. The activity included selling counterfeit goods such as fake cigarettes, alcohol and handbags; selling restricted or forbidden weapons; and allegations that employees were taking bribes from merchants to boost search ratings or advertising space.

The company sold nearly 368 million shares during its IPO at $68 per share raising more than $25 billion, the lawsuit said. When the SAIC released information on Jan. 28 about the alleged illegal activity the company's stock dropped about 4 percent, or $4.49 per share, falling to $98.45 per share.

The lawsuit seeks class status for all shareholders who owned stock between Oct. 21 and Jan. 28, and unspecified damages including court costs.

Huang is represented by Laurence Rosen of The Rosen Law Firm. P.A. in Los Angeles.

The United States District Court for the Central District of California case number is 2:15-cv-00789.

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